Regional economic outlook mixed for beginning of 2010

By Ribal Dayekh in Dubai
For Al-Shorfa.com
2010-01-16

[KARIM SAHIB/AFP/Getty Images] Dubai's stock market dropped to its lowest level in a month.

Arab markets ushered in the New Year with a series of ups and downs, amid reports of a decline in consumer confidence and drop in stock market exchange volume in a number of countries.

The UAE consumer confidence index recorded a decline of 4.8 points for the first time since March 2009, according to a study prepared by "Bayt.com", a website specializing in employment data for the Middle East in co-operation with the company YouGovSiraj.

The quarterly index is considered an indicator of consumer prospects regarding inflation, employment opportunities and cost of living. Other countries in the Middle East and North Africa also witnessed a decline in the index. Morocco recorded a 5-point drop, followed by Kuwait, Syria and Qatar.

As for countries that recorded an increase in consumer confidence, Algeria topped the list with an increase of 12.1 points followed by Lebanon, Bahrain and Saudi Arabia.

In the UAE, concerns about debt and the possible effect of poor results from banks caused Dubai's stock market to drop to its lowest level in a month on Thursday (January 14th). Abu Dhabi's main stock exchange index also declined in regional stock markets. The Dubai Stock Exchange closed with a 0.3% drop, a record low.

In Saudi Arabia, the governor of the Monetary Agency reported that some of the projects facing funding problems in the Kingdom are seeking investment capital from foreign banks after Saudi banks declined to provide funding. These negotiations are being facilitated by local consultant offices.

Many interested foreign banks have funded projects in Saudi Arabia in exchange for strong guarantees and some for low interest rates with the funding passing through local banks.

Also in Saudi Arabia, days after the launching of Dubai's Burj Khalifa, the highest tower in the world at 828 metres, Saudi billionaire Prince Walid Ben Talal announced plans to move forward with his project to build a skyscraper which will be more than 1,000 metres tall in Jeddah. Prince Walid added that his group, Kingdom Holding Company, will be investing in several hotels in the Gulf region.

In Qatar, the British embassy said 11 British companies entered the market during 2009. Embassy officials said that the establishment of these companies in Qatar in one year is a testament to the strong financial situation as well as investment opportunities.

Marc Elam, director of trade and investment for the British embassy of Qatar, said the volume of Qatari exports to the UK increased an astounding 370 % in 2009. The bulk of this increase was from Qatari gas exports through the gas receiving station in South Hook that was inaugurated April 2009.

In Bahrain, the Governor of the Central Bank Rashid al-Mearaj said this week that the Central Bank is not seeing inflation pressures at the moment. When asked about his expectations for inflation in 2010, he replied that he believes inflation is under control domestically. The inflation rate slowed in Bahrain to 1.1% in November versus 1.5% in October of last year.

The 2009 Performance of the Middle East Investment Banking Industry report, published by Thompson Reuters on January 6th, showed that 2009 witnessed a sharp drop in the number of acquisitions and mergers in the Middle East, less than $13 billion in total as compared to $40 billion in 2007.

The volume of trade on the stock market exchange also dropped to less than $6.89 billion in 2009 versus $36 billion dollars in 2007. Fees paid to investment brokers in 2009 fell to $599 million, a 50 % drop from 2008.

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